The debate over gold vs Bitcoin remains a hot topic around the globe. But with Russia making massive investments in gold, some analysts are quick to point to Bitcoin’s flaws as a national reserve.
Let’s take a look at what the experts have to say about gold vs Bitcoin and whether Russia’s appetite for the precious metal affects the cryptocurrency ecosystem.
Russian gold is worth $109 billion
It’s no secret that Russian President Vladimir Putin is hoping to break his country’s reliance on the USD. While cryptocurrency enthusiasts pondered whether a Russian national cryptocurrency could be part of the president’s plan for solving the issue, it seems as if Russia has turned to more traditional methods.
The country’s national bank has been the largest buyer in the gold market over the past few years, and the strategy has paid off. Russian gold gained an extra 42% in value in 2019 alone. Currently, the country’s gold reserves are estimated at $109.5 billion.
Gold helped Russia compensate for the losses made from some currency exchange operations that didn’t go as planned.
The country sold USD for euro, yen, and yuan. This was not a brilliant move with the Chinese fiat currency struggling in the market. By reinforcing its reserves of gold, Russia managed to gain back value immediately and has positive perspectives for the coming years.
Russia isn’t the only country to place a bet on the precious metal. Despite the endorsement for blockchain technology, China has been stockpiling gold lately as well. The two countries collectively bought 251 tonnes of gold in 2019.
It seems as if both countries are following the same strategy for countering the USD as the trade war between the USA and China teeters on becoming a currency war as well. No cryptocurrency, Bitcoin included, is mature enough to fulfil such a role at the moment.
Gold vs Bitcoin: What the experts say
As gold regains its position as the go-to investment for central banks, more investors and experts are becoming vocal in the debate of gold vs Bitcoin.
Traditional gold-bug analysts never miss an opportunity to point out that gold remains the “ultimate recession hedge”. This is just the sort of statement that immediately sparks a wave of speculation on the role of Bitcoin and cryptocurrencies.
Among the analysts that have gone viral on this round of statements against Bitcoin is Chris Mancini, a research analyst for the Gabelli Gold Fund, and long-time gold bug Peter Schiff.
In an interview for Kitco News, Mancini explained that more countries had turned to gold to protect themselves from an emerging global recession. The analyst even went further to say that the US could decide to tie the dollar to gold for stability reasons in the event of a new financial crisis.
When it came to gold vs Bitcoin, Mancini underlined that no country would invest in Bitcoin as an alternative to gold. In other words, only the precious metal could protect national fiat currencies against inflation.
While Mancini praised gold and kept a neutral tone on Bitcoin, Peter Schiff went viral by going against the digital coin. According to Schiff, Bitcoin has “failed the safe haven test” many times. The SchiffGold chairman pointed out that Bitcoin went down while stocks and gold prices were going up this summer.
Bitcoin has again failed the safe haven test. On Friday, as escalating trade tensions sent global stock markets plunging, investors sought refuge in monetary safe havens. The Japanese yen, Swiss franc, and especially gold all moved higher. Yet Bitcoin plunged by more than stocks!
— Peter Schiff (@PeterSchiff) August 28, 2019
Peter Schiff has a long history of speaking against Bitcoin as he continues to stress the reliability of gold compared to digital assets. Russia’s pro-gold strategy gave him one more opportunity to turn the spotlight on himself once again.
Limitless possibilities with Bitcoin?
Meanwhile, cryptocurrency enthusiasts and investors don’t see Bitcoin being weaker just because central banks are buying gold.
Gemini co-founder Cameron Winklevoss entered the gold vs Bitcoin debate to remind us that the future belongs to digital assets. Gold may be less volatile than BTC, but Bitcoin has “boundless possibilities” on its side.
Because Bitcoin is open source software, its possibilities are boundless. I often talk about gold as a target market cap, but that's really just the beginning…it's digital gold, source of truth, etc…
— Cameron Winklevoss (@winklevoss) October 23, 2019
Paxos CEO Chad Cascarilla also spoke in favour of Bitcoin and its bright future. Many countries countering inflation at the moment are witnessing an increased demand for Bitcoin.
For many citizens in these countries, digital coins are now an effective way to protect their savings from a weakening national currency. Moreover, as companies and governments find new use cases for blockchain technology, we may see crypto adoption grow as well.
In today's #Gold vs #Bitcoin Interview, Chad Cascarilla, of @paxosglobal, discusses if blockchain technology will change the future of the global financial system with @MarkYusko. Join the fight for the last few rounds now: https://t.co/Vwvj88uHoL pic.twitter.com/tyTbMGbRk2
— Real Vision (@realvision) October 24, 2019
Russia went back to gold to protect its national reserves against what seems like an imminent currency war against the US. It is, after all, still the traditional and most secure way of ensuring stability and long-term gains in the market.
Bitcoin is too volatile to carry out such a task, at least for now. Price drops and gains in the cryptocurrency markets could drastically reduce or amplify a national reserve, so no country is likely to realistically invest in Bitcoin at the moment – apart from maybe Venezuela, whose gold reserves are depleting rapidly.